When people offer a piece of paradise for sale, you’d think it would be an entire lot or a whole home. But a new ownership concept is giving people the chance to own a piece of a home. A three-bedroom,
When people offer a piece of paradise for sale, you’d think it would be an entire lot or a whole home.
But a new ownership concept is giving people the chance to own a piece of a home.
A three-bedroom, three-bath home in Princeville from $225,000 to $245,000?
A search on Century 21 All Islands Web site shows two such homes listed in that price range. But it’s not as a good a deal as it seems.
Called “fractional” ownership, the strategy appears to be a new way to buy and sell expensive residential homes here on Kaua‘i by cutting them up into increments of up to six.
In the case of six owners — which is the legal limit — each owner would share occupancy in two-month intervals and pay tax assessments of one-sixth the total.
If it sounds like a timeshare, it isn’t. Fractional ownership is legal, doesn’t conflict with any county codes, nor conflicts with the federal Securities and Exchange Commission’s definition of a timeshare, which is anything with seven or more owners.
While common in the condominium business, it’s a relatively new concept for residential homes, prompted by Kaua‘i’s skyrocketing real-estate prices. Real-estate professionals argue that it allows people to buy in on otherwise unaffordable properties and maximize client investment.
“It’s like a car,” said Gary Petrison, sales manager for Century 21 All Islands. “The sum of the parts are often worth more than the whole.”
Critics of fractional ownership are saying that the strategy will drive home prices up, consequently raising property tax assessments that much more.
“It will raise the taxes of existing residents based on the sale price,” wrote Anne Schneider of Hanalei to The Garden Island yesterday.
That could happen, Petrison agrees, but he insists that fractional ownership is just another way real-estate professionals can do their best for their clients.
Fractional ownership comes at a time when Kaua‘i residents, reacting to record increases in tax assessments, voted overwhelmingly for the 2004 Ohana Kauai Amendment, which rolled back property tax assessments to 1998 levels for people who currently own homes here.
Fractional ownership for condominiums took hold on Maui a decade ago, when prices there began to hike.
But fractional ownership of single-family homes is rare even on Maui, said Greg Pereira, an agent with Century 21 in Wailea.
“You could be looking at something completely new there on Kaua‘i,” he said.
“We’ve seen this kind of thing before, where people form a hui and buy in on a property,” Petrison said. “But fractional ownership for single-family residences is a relatively new concept for Kaua‘i.”
Today, it’s taking hold in some of Kaua‘i’s most expensive locales, like Princeville on Kaua‘i’s Northshore, where home prices have tripled over the last year alone.
“We’ve represented a number of buyers who’ve purchased in this manner,” Petrison said.
Century 21 presently has at least one home they’re now marketing as fractional ownership — a three-bedroom, three-bath, single-family residence on Albert Road in Princeville. They’re offering 60-day ownership increments for $225,000.
O’Connor Realty LLC is also offering two, 60-day ownerships in a Northshore home on Kamehameha Road for $245,000 and $235,000 each.
Fractional ownership being legal does little to console people like Schneider, who worry that the strategy will become a trend, further fractionalizing traditional single-owner, single-family neighborhoods.
“The change in type of ownership inherently changes the type of use from residential to vacation rental with the absence of any mitigation,” she wrote. “It will leave no one to be responsible as there will be six separate owners to notify in the event of a hurricane or emergency. Is this what we want here?”
Phil Hayworth, business editor, may be reached at 245-3681 (ext. 251) or phayworth@pulitzer.net.
